Small Business Size Standards: Adoption of 2022 North American Industry Classification System for Size Standards

AGENCY:

U.S. Small Business Administration.

ACTION:

Final rule.

SUMMARY:

The U.S. Small Business Administration (“SBA” or “Agency”) amends its small business size regulations to incorporate the U.S. Office of Management and Budget's (OMB) North American Industry Classification System (NAICS) revision for 2022, identified as NAICS 2022, into its table of small business size standards. The NAICS 2022 revision created 111 new industries by reclassifying, combining, or splitting 156 NAICS 2017 industries or their parts. SBA's size standards for these 111 new industries under NAICS 2022 have resulted in an increase to the size standards for 22 industries and 29 parts of two industries under NAICS 2017, a decrease to size standards for seven industries and 53 parts of two industries, a change in the size standard measure from average annual receipts to number of employees for one industry, a change in the size standard measure from number of employees to average annual receipts for a part of one industry, and no change in size standards for 117 industries and 19 parts of seven industries.

DATES:

This rule is effective October 1, 2022.

FOR FURTHER INFORMATION CONTACT:

Dr. Khem R. Sharma, Chief, Office of Size Standards, (202) 205-6618 or sizestandards@sba.gov. This phone number can also be reached by individuals who are deaf or hard of hearing, or who have speech disabilities, through the Federal Communications Commission's TTY-Based Telecommunications Relay Service teletype service at 711.

SUPPLEMENTARY INFORMATION:

Effective October 1, 2000, the U.S. Small Business Administration (SBA) adopted North American Industry Classification System (NAICS) 1997 industry definitions as a basis for defining industries for its table of small business size standards, replacing the 1987 Standard Industrial Classification (SIC) (65 FR 30836 (May 15, 2000)). Since then, the Office of Management and Budget (OMB) has issued five revisions to NAICS. SBA's table of size standards adopted the OMB's first revision, NAICS 2002, effective October 1, 2002 (67 FR 52597 (August 13, 2002)); the second revision, NAICS 2007, effective October 1, 2007 (72 FR 49639 (August 29, 2007)); the third revision, NAICS 2012, effective October 1, 2012 (77 FR 49991 (August 20, 2012)); and fourth revision, NAICS 2017, effective October 1, 2017 (82 FR 44886 (September 27, 2017)).

On December 21, 2021, OMB published its fifth and latest revision to NAICS “Notice of NAICS 2022 Final Decisions; Update of Statistical Policy Directive No. 8, North American Industry Classification System: Classification of Establishments; and Elimination of Statistical Policy Directive No. 9, Standard Industrial Classification of Enterprises” (86 FR 72277). In the December 21, 2021, Federal Register notice, OMB accepted the Economic Classification Policy Committee's (ECPC) recommendations, as outlined in the July 2, 2021, Federal Register notice (86 FR 35350), for the 2022 revisions to NAICS, as well as the recommendations to update OMB Statistical Policy Directive No. 8, North American Industry Classification System: Classification of Establishments and to eliminate OMB Statistical Policy Directive No. 9, Standard Industrial Classification of Enterprises.

The OMB's notice stated that Federal statistical establishment data published for reference years beginning on or after January 1, 2022, should be published using NAICS 2022. Although SBA is not a statistical agency, it is adopting NAICS 2022 for its table of size standards, effective October 1, 2022.

As with the previous NAICS revisions, SBA is adopting the latest NAICS revision, identified as NAICS 2022, effective October 1, 2022 ( i.e., the beginning of the new fiscal year following the effective date of the OMB's release of the NAICS 2022 revision), for several reasons: (1) Federal Government contracting data and related statistics will be more consistent and comparable with past data for analyzing future small business activity if implementation of the revised table of size standards occurs at the beginning of a new fiscal year; (2) users of size standards, for instance, Federal prime contractors, who may use the size standards for developing their subcontracting plans, can have more consistent data to examine the past and future Federal contracting trends; and (3) small business size standards apply to most Federal agencies and their programs involving small businesses; with a time lag between the OMB's effective date and SBA's update of its size standards, agencies will have sufficient time to implement the changes and develop training tools, if necessary.

Changes in NAICS 2022

The NAICS 2022 revision created 111 new NAICS industries by splitting, merging, or modifying 6-digit codes or industry titles/definitions of 156 exiting industries under NAICS 2017 structure, of which nine industries were split to two or more NAICS 2022 industries. On July 5, 2022, SBA published proposed size standards for the new industries under NAICS 2022 (87 FR 40034). These changes are broken down by NAICS sector in Table 1, “Modified Industries under NAICS 2017 and New Industries under NAICS 2022 by NAICS Sector.” As can be seen in Table 1, Sector 44-45 (Retail Trade) accounts for the largest proportions of NAICS 2017 industries that have changed or been amended and of the new industries that have been created under NAICS 2022, followed by Sector 31-33 (Manufacturing), and Sector 51 (Information).

Of the 111 new industries under NAICS 2022, 79 (71% of the new industries) were created by merging two or more NAICS 2017 industries in their entirety, one or more of NAICS 2017 industries and part(s) of one or more NAICS 2017 industries, or parts of two or more NAICS 2017 industries. Altogether, 125 NAICS 2017 industries or their parts were involved in the creation of the 79 new industries. Of the remaining 32 new industries, OMB changed the 6-digit codes for 11 (10%) NAICS 2017 industries without changing their titles, amended the industry titles of 14 (13%) NAICS 2017 industries without changing their 6-digit codes, and created seven (6%) new industries by modifying the title, 6-digit code, or definition (or any combination thereof) of a single NAICS 2017 industry or part. These results are summarized in Table 2, “Summary of NAICS 2022 Changes.”

Complete information on the relationship between NAICS 2017 and NAICS 2022 is available on the U.S. Bureau of the Census (Census Bureau) website at https://www.census.gov/naics/. The Census Bureau's website also provides detailed documentation on Federal notices involving the replacement of SIC with NAICS, and all subsequent NAICS updates and revisions, including both the July 2, 2021 and December 21, 2021, Federal Register notices regarding the NAICS 2022 revision.

Of the 79 new NAICS 2022 industries formed by merging existing NAICS 2017 industries or their parts, 33 or 42% were formed by merging one NAICS 2017 industry with parts of two other NAICS 2017 industries. Likewise, 20 or 25% of new industries were formed by merging two NAICS 2017 industries, and 12 or 15% were formed by merging one NAICS 2017 industry with part of another industry. These results and the formation of the remaining 14 or 18% of new industries are summarized in Table 3, “Formation of New Industries in NAICS 2022.”

Table 4, “NAICS 2017 Industries or Their Parts Matched to NAICS 2022 Industries,” below, shows the detailed changes from NAICS 2017 to NAICS 2022.

Size Standards for New Industries in NAICS 2022

On October 22, 1999, SBA proposed to replace SIC with NAICS 1997 as the basis of industry definitions for its table of small business size standards (64 FR 57188). The proposed rule included a set of guidelines or rules that SBA applied to convert the size standards for industries under SIC to industries under NAICS. The guidelines primarily aimed to minimize the impact of applying a new industry classification system on SBA's size standards and on small businesses that qualified as small under the SIC-based size standards. SBA received no negative comments against the proposed guidelines. Thus, SBA published its final rule on May 15, 2000 (65 FR 30386), corrected on September 5, 2000 (65 FR 53533), adopting the resulting table of size standards based on NAICS 1997 structure, as proposed. To be consistent, SBA generally applied the same guidelines when it updated its table of size standards to adopt NAICS 2002, NAICS 2007, NAICS 2012, and NAICS 2017 revisions. In those updates as well, SBA received no adverse comments against using those guidelines, or against the resulting changes to the size standards. These guidelines to adopt NAICS revisions for size standards were also included in the SBA's “Size Standards Methodology” white paper and SBA received no adverse comments when the revised methodology was open for public comments. Accordingly, for the July 5, 2022, proposed rule to adopt NAICS 2022 structure for its size standards table as well, SBA generally followed the same guidelines, as shown below in Table 5, “General Guidelines to Establish Size Standards for New Industries under NAICS 2022.”

SBA generally applied the guidelines in Table 5 to convert the size standards from NAICS 2017 industries to NAICS 2022 industries. In addition to following the above general guidelines in Table 5, in cases where a new industry is formed by merging multiple industries or parts of multiple industries with substantially different levels or measures of size standards, as detailed in the July 5, 2022, proposed rule, SBA also examined the relevant latest industry and Federal procurement data to determine an appropriate size standard for the new industry. Developed based on the above guidelines and analyses of the relevant data, where necessary, SBA's size standards for the new industries under NAICS 2022 are shown in Table 6, Size Standards for New Industries in NAICS 2022.” Also shown in Table 6 are the current size standards for the affected NAICS 2017 industries and their parts.

Following the publication of the July 5, 2022, proposed rule to incorporate NAICS 2022 into the SBA's table of size standards, as part of the second five-year review of size standards under the Small Business Jobs Act of 2010 (Jobs Act) (Pub. L. 111-240 (September 27, 2010)), SBA adopted revisions to size standards for industries under NAICS Sectors 42 (Wholesale Trade) and 44-45 (Retail Trade), effective July 14, 2014 (87 FR 35869 (June 14, 2022)). Accordingly, in this final rule, SBA is adjusting proposed size standards for the new industries under NAICS 2022 to reflect new size standards for Sectors 42 and 44-45 the Agency adopted in the June 14, 2022, final rule. Table 6 shows the adjusted size standards.

Summary of Size Standards for NAICS 2022 Industries

The NAICS 2022 revision created 111 new industries by reclassifying, combining, or splitting 156 NAICS 2017 industries or their parts. SBA's size standards for these 111 new industries under NAICS 2022, as shown in Table 3 (above) have resulted in an increase to the size standards for 22 industries and 29 parts of two industries under NAICS 2017, a decrease to size standards for seven industries and 53 parts of two industries, a change in the size standard measure from average annual receipts to number of employees for one industry, a change in the size standard measure from number of employees to average annual receipts for part of one industry, and no change in size standards for 117 industries and 19 parts of seven industries. These figures are slightly different from those published in the proposed rule because of the adoption of the latest size standards for industries in Sectors 42 and 44-45 that became effective on July 14, 2022 (87 FR 35869).

In accordance with 13 CFR 121.102(e), SBA advises eligible parties of the option to file a petition for reconsideration of a revised, modified, or established size standard at SBA's Office of Hearings and Appeals (OHA) within 30 calendar days after publication of this final rule in accordance with 15 U.S.C. 632(a)(9) and 13 CFR 134 Subpart I. OHA can be reached using the following contact information: by mail at U.S. Small Business Administration, Office of Hearings and Appeals, 409 Third St. SW, Eighth Floor, Washington, DC 20416, by email at ohafilings@sba.gov by phone: 202-401-8200 TTY/TRS: 711, or by fax at (202) 205-7059.

Discussion of Comments

For the July 5, 2022, proposed rule, SBA provided a 30-day comment period for the public to comment on proposed changes to size standards from the adoption of the NAICS 2022, which ended on August 4, 2022. SBA sought comment on whether its proposed size standards for new industries under NAICS 2022 were appropriate and suggestions on alternative size standards, along with supporting data and analysis, if proposed size standards were not appropriate. SBA also sought comments on its methodology for converting size standards from NAICS 2017 to NAICS 2022 and data sources and analyses it used in developing proposed size standards for new industries. SBA received three comments, which are summarized and discussed below.

Comments on Correct Size Standards

SBA received one comment contending that the Agency did not propose the latest size standards it updated on July 14, 2022 for three NAICS codes, namely NAICS 425120 (Wholesale Trade Agents and Brokers), NAICS 445291 (Baked Goods Stores), and NAICS 445292 (Confectionery and Nut Stores). The commenter urged the SBA to use the most recent size standards for these NAICS codes.

SBA Response

Following the publication of the July 5, 2022, proposed rule to adopt NAICS 2022 for size standards, as part of the second five-year review of size standards under the Jobs Act, SBA adopted size standards revisions for industries under NAICS Sectors 42 and 44-45, effective July 14, 2022. At the time when SBA published the NAICS 2022 proposed rule, the old size standards were in effect. Thus, SBA applied the old size standards in the proposed rule. In this final rule, however, SBA is adopting the July 14, 2022, version of the size standards as shown in Table 6 (above) and Table 7, Adopted Size Standards for NAICS 425120, 445291 and 445292, below, which are the latest size standards in effect.

Comments on Missing NAICS Codes

SBA received a comment stating that the proposed rule did not mention three NAICS codes added for the 2022 NAICS revision, namely NAICS 521110 (Monetary Authorities-Central Bank), NAICS 541120 (Offices of Notaries), and NAICS, 551114 (Corporate, Subsidiary, and Regional Managing Offices). These are found on the Economic Census NAICS website ( https://www.census.gov/naics ), the commenter added.

SBA Response

SBA disagrees with the commenter that NAICS codes 521110, 541120, and 551114 were newly added to NAICS 2022. These NAICS codes existed since the initial, 1997 edition of NAICS, which replaced the Standard Industry Classification (SIC) system as the basis of industry definitions for size standards. Table 8, NAICS-SIC Concordance for NAICS 521110, 541120, and 551114, shows the relationship between NAICS and SIC with respect to these three NAICS codes. When SBA first switched from SIC to NAICS as the basis of industry definitions for size standards, it did not establish small business size standards for these NAICS codes for the following reasons.

NAICS 521110—Monetary Authorities-Central Bank

In the United States, the functions of the Monetary Authorities-Central Bank are performed by the Federal Reserve System. According to the NAICS manual, found at www.census.gov/naics, establishments of the Board of Governors of the Federal Reserve System are classified in NAICS Industry 921130, Public Finance Activities. As stated in Footnote 17 to the SBA's table of size standards, small business size standards are not established for industries within NAICS Sector 92, Public Administration.

NAICS 541120—Offices of Notaries

As shown in Table 8 (above), NAICS Industry 541120 (Offices of Notaries) is not a valid industry in the United States and accordingly SBA does not establish the small business size standard for that NAICS code. According to the NAICS manual, available at www.census.gov/naics, establishments of notaries public engaged in activities, such as administering oaths and taking affidavits and depositions, witnessing and certifying signatures on documents, but not empowered to draw and approve legal documents and contracts, are classified in U.S. NAICS Industry 541199, All Other Legal Services. Moreover, NAICS 541120 is not covered by both the Economic Census and County Business Patterns Reports.

NAICS 551114—Corporate, Subsidiary, and Regional Managing Offices

As shown in Table 8 (above), NAICS Industry 551114 did not correspond to any specific industry under SIC. As a result, when SBA first established size standards for NAICS industries, the Agency did not establish a small business size standard for NAICS 551114. The adoptions of the subsequent NAICS revisions also did not assign the size standard for NAICS 551114. Like NAICS 541120, NAICS 55114 is also not covered by both the Economic Census and County Business Patterns Reports.

Comments on Inflation Adjustment of Revenue-Based Size Standards

SBA received a comment urging SBA to adjust all revenue-based size standards for inflation. The commenter maintained that current inflation is running at 9.1% and that inflation adjustment of size standards by that amount is appropriate in the current economic environment.

SBA Response

SBA is required to assess the impact of inflation on its monetary-based size standards at least once every five years (67 FR 3041 (January 23, 2002)) and 13 CFR 121.102(c)) and make necessary adjustments to restore their values in real terms. As stated in the SBA's Semiannual Regulatory Agenda for Spring 2022, SBA is currently pursuing a separate rulemaking (RIN 3245-AH93) to assess the impact of the current general price increases on size standards. SBA agrees with the comment that current inflation trends warrant adjustment of monetary-based size standards for inflation. SBA expects to issue that rulemaking in the near future.

Conclusion

In absence of adverse comments against the proposed size standards for the new industries under NAICS 2022, SBA is adopting the size standards for the new industries, as proposed.

Evaluation of Dominance in Field of Operation

Section 3(a) of the Small Business Act (15 U.S.C. 632(a)) defines a small business concern as one that: (1) Is independently owned and operated; (2) Is not dominant in its field of operation; and (3) Meets a specific small business definition or size standard established by SBA's Administrator. SBA considers, as part of its evaluation, whether a business concern at a proposed or revised size standard would be dominant in its field of operation. For this, SBA generally examines the industry's market share of firms at the proposed or revised standard. SBA also examines distribution of firms by size to ensure that a contemplated size standard excludes the largest and potentially dominant firms within an industry. The results of the market share analysis and size distribution of firms may indicate whether a firm, at the proposed or revised size standard, can exercise a control on a national basis. SBA has determined that for the industries for which size standards have been changed in this proposed rule, no individual firm at or below the proposed size standard will be large enough to dominate its field of operation. The share of a firm in total industry receipts at the proposed size standard, among those industries for which size standards have been changed is, on average, 1.8%, ranging from 0.005% to 31.2%. SBA determines that these levels of market shares effectively preclude a firm at or below the proposed size standards from exerting control on any of the industries.

Alternatives To Adopting NAICS 2022 for Size Standards

As an alternative to adopting new size standards for NAICS 2022 industries, in this final rule, SBA considered retaining NAICS 2017 as the basis of industry definitions for its small business size standards. That would, however, lead to inconsistency between SBA's size standards and establishment data published by Federal agencies that will adopt NAICS 2022 for their statistical and other data collection programs. OMB stated in its December 21, 2021, notice that “Federal statistical establishment data published for reference years beginning on or after January 1, 2022, should be published using the 2022 NAICS United States codes.” SBA is not a statistical agency, but the Agency uses for its size standards analyses establishment data collected by other Federal agencies, such as the Economic Census data and County Business Patterns from the U.S. Census Bureau. If SBA continues using NAICS 2017 for its size standards, it will not be able to analyze and evaluate industry structure adequately and accurately and adjust small business size standards appropriately because the forthcoming Economic Census and County Business Patterns data based on NAICS 2022 will not be compatible with NAICS 2017. That would run counter to the mandate of the Jobs Act, which requires SBA to review all size standards and adjust them appropriately to reflect the current industry and market data every five years.

To establish, review, or revise, where necessary, small business size standards, SBA uses special tabulations of industry data that it obtains from the U.S. Census Bureau based on its Economic Census of U.S. industries and businesses, and establishment data from its County Business Patterns. Because the 2022 Economic Census will be based on NAICS 2022 industry definitions, it is imperative that SBA use NAICS 2022 as the basis of industry definitions for its table of small business size standards.

Justification for the October 1, 2022, Effective Date

The Administrative Procedure Act (APA) requires that “publication or service of a substantive rule shall be made not less than 30 days before its effective date, except * * * as otherwise provided by the agency for good cause found and published with the rule.” 5 U.S.C. 553(d)(3). The purpose of the APA provision delaying the effective date of a rule for 30 days after publication is to provide interested and affected members of the public sufficient time to adjust their behavior before the rule takes effect. For the reasons set forth below, SBA finds that good cause exists to make this final rule become effective on October 1, 2022, less than 30 days after it is published in the Federal Register .

SBA's small business size standards, matched to NAICS 2022, to be adopted in a forthcoming final rule, will be effective on October 1, 2022, for the following reasons:

1. OMB stated in its December 21, 2021, notice that Federal statistical establishment data published for reference years beginning on or after January 1, 2022, should be published using NAICS 2022. SBA is not a statistical agency, but it uses the establishment data collected from other Federal agencies, such as the Economic Census and County Business Patterns data from the Census Bureau for its size standards analysis. Similarly, Federal procurement databases and systems, such as FPDS-NG and the System for Award Management (SAM), use NAICS codes from SBA's table of size standards. If SBA does not adopt NAICS 2022 for its table of size standards in a timely manner, it will result in inconsistency between SBA's size standards and other Federal procurement databases.

Small business size standards apply to most Federal agencies and their programs involving small businesses; the time lag between the OMB's effective date and SBA's update to its size standards has already given them time to implement the changes and develop training tools, if necessary; so further additional time to prepare to comply is unnecessary.

2. October 1, 2022, is the start of the new Federal Government fiscal year following OMB's adoption of NAICS 2022 effective January 1, 2022, and is consistent with SBA's adoption of previous NAICS revisions for its size standards effective at the beginning of the new fiscal year after the OMB's effective date. Like the adoption of the previous NAICS revisions, the adoption of NAICS 2022 is “not significant” and noncontroversial, as SBA is merely implementing the revised NAICS codes promulgated by OMB through a comment and notice process.

3. With the adoption of the updated size standards at the start of the new fiscal year (October 1, 2022), instead of the OMB January 1, 2022, effective date, Federal agencies that use NAICS industry definitions and SBA's size standards can collect comparable and consistent data on Federal statistics for program and industry analyses.

4. With the October 1, 2022, effective date, Federal agencies that use SBA's small business size standards for their programs will have sufficient time to plan and implement the updated size standards and assess the impact of size standards changes on their programs.

Compliance With Executive Orders 12866, the Congressional Review Act (5 U.S.C. 801-808), the Regulatory Flexibility Act (5 U.S.C. 601-612), Executive Orders 13563, 12988, and 13132, and the Paperwork Reduction Act (44 U.S.C. Ch. 35)

Executive Order 12866

OMB has determined that this final rule is not a “significant regulatory action” for purposes of Executive Order 12866. This rule incorporates the OMB's 2022 revisions of NAICS, which SBA uses as a basis of industry definitions for purposes of establishing small business size standards. As discussed above in the Supplementary Information section, the size standards of some industries or their parts would change because of the adoption of the NAICS 2022 revisions for SBA's Table of Size Standards. However, SBA has determined that a vast majority of businesses defined as small under the current NAICS 2017 based size standards will continue to remain small under the NAICS 2022 based size standards. The final rule will also affect other Federal Government programs that use SBA's size standards and provide various benefits for small businesses. In order to help explain the need and objective of this proposed rule and its potential benefits and costs, SBA is providing, below, a Cost Benefit Analysis of this final rule, including (1) A statement of the need for the regulatory action, (2) An examination of alternative approaches, and (3) An evaluation of the benefits and costs—both quantitative and qualitative—of the regulatory action and the alternatives considered.

Cost Benefit Analysis

1. What is the need for the regulatory action?

SBA believes that revising its small business size standards based on NAICS 2022 is in the best interests of small businesses. SBA's mission is to aid and assist small businesses through a variety of financial, procurement, business development and counselling, and advocacy programs. To ensure that these programs are best directed to their intended beneficiaries, SBA establishes numerical small business definitions (usually referred to as “size standards”) to determine which businesses are deemed eligible for Federal small business assistance. NAICS 2022 provides the latest industry definitions reflecting the latest changes in industry structure in the United States.

Under the Small Business Act (Act) (15 U.S.C. 632(a)), the SBA Administrator is responsible for establishing small business size definitions and for ensuring that such definitions vary from industry to industry to reflect differences among various industries. By analyzing and reviewing size standards based on the NAICS 2022 industry definitions, SBA can more accurately and appropriately fulfill its mandate. If SBA does not use the latest industry definitions under NAICS 2022, size standards would not accurately reflect differences among industries. In addition, the Jobs Act requires SBA to review, at least every five years, all size standards and make necessary adjustments to reflect current industry and market conditions. To better serve this mandate, SBA needs to evaluate the industry data based on the latest NAICS industry definitions available.

In this final rule, SBA is generally following the same guidelines that it followed for adopting prior NAICS revisions for size standards, as spelled out under the Supplemental Information section. SBA also analyzed the relevant industry and program data to determine the size standards for certain NAICS 2022 industries involving NAICS 2017 industries or their parts with substantially different size standards. Size standards based on NAICS 2022 industry definitions and corresponding data will serve SBA's mission more effectively.

2. What are the potential benefits and costs of this regulatory action?

As stated previously, the NAICS 2022 revision created 111 new industries by reclassifying, combining, or splitting 156 NAICS 2017 industries or their parts. Changes from NAICS 2017 to NAICS 2022 consist of mergers of 125 NAICS 2017 industries or their parts to form the 79 new industries in NAICS 2022 with impacts on size standards on a number of NAICS 2017 industries. The NAICS 2022 revision also includes 32 changes in 6-digit codes, industry titles, or descriptions without changing the size standards. SBA's size standards for these 111 new industries under NAICS 2022 have resulted in an increase to the size standards for 22 industries and 29 parts of two industries, a decrease to size standards for seven industries and 53 parts of two industries, a change in the size standard measure from average annual receipts to number of employees for one industry, a change in the size standard measure from number of employees to average annual receipts for part of one industry, and no change in size standards for 117 industries and 19 parts of seven industries. The benefits, costs, and transfer impacts of these changes are discussed below.

OMB directs agencies to establish an appropriate baseline to evaluate any benefits, costs, or transfer impacts of new regulatory actions and alternative approaches considered. The baseline should represent the agency's best assessment of what the world would look like absent the regulatory action. For a regulatory action promulgating modifications to an existing regulation (such as modifying the existing size standards), a baseline assuming no change to the regulation ( i.e., making no changes to current size standards) would generally provide an appropriate benchmark for evaluating benefits, costs, or transfer impacts of proposed or final regulatory changes and their alternatives.

The Baseline

For purposes of this regulatory action, the baseline represents maintaining the “status quo,” i.e., making no changes to the current size standards. Using the number of small businesses and levels of small business benefits (such as set-aside contracts, SBA's loans, disaster assistance, etc.) they receive under the current size standards as a baseline, one can examine the potential benefits, costs, and transfer impacts of changes to size standards on small businesses and on the overall economy.

Based on the 2017 Economic Census data, of a total of about 880,245 firms in the 156 impacted industries under NAICS 2017, 97.9% are considered small under the current size standards under NAICS 2017.

Similarly, based on the data from FPDS-NG for fiscal years 2018-2020, about 15,400 unique firms in those 156 NAICS 2017 industries received at least one Federal contract during that period, of which 76.2% were found to be small under the current size standards. Of about $18.6 billion in total average annual contract dollars awarded to businesses in the impacted industries during that period, 25.6% went to small businesses. Of about $4.8 billion in total small business contract dollars awarded in those industries during that period, 87.1% were awarded through various set-aside programs and 12.9% were awarded through non-set aside contracts. Table 9, Baseline of Impacted Industries Under NAICS 2017, provides these baseline results.

Based on the SBA's internal data on its loan programs for fiscal years 2018-2020, small businesses in those 156 industries received, on an average annual basis, a total of 8,316 7(a) loans and CDC/504 loans in that period. That corresponded to about $4.8 billion in total loan amount, of which 85.8% was issued through the 7(a) loan guarantee program and 14.2% was issued through the CDC/504 program. During fiscal years 2018-2020, small businesses in those industries also received 589 loans through the SBA's EIDL program, totaling about $52.6 million on an annual basis.

Increases to Size Standards

As stated above, SBA's size standards for the 111 new industries under NAICS 2022 have resulted in an increase to the size standards for 22 industries and 29 parts of two industries under NAICS 2017. Below are descriptions of the benefits, costs, and transfer impacts of increases to size standards.

Benefits of Increases to Size Standards

The benefits of adopting NAICS 2022 and the resulting increases to size standards will accrue to three groups in the following ways: (1) Some businesses that are currently above their current size standards may gain small business status, thereby becoming eligible to participate in Federal small business assistance programs, including SBA's 7(a) loan program, CDC/504 loan program, EIDL program, Surety Bond Guarantee Program, and Federal procurement and business development programs intended for small businesses; (2) Growing small businesses that are close to exceeding the current size standards for their NAICS 2017 industries may retain their small business status for a longer period under the new size standards under NAICS 2022, and can continue participating in the above programs; and (3) Federal Government agencies will have a larger pool of small businesses from which to draw to fulfill their small business procurement requirements because they will be able to define more accurately the principal purposes of their procurements under NAICS 2022 industry definitions.

The most significant benefit to businesses from increases to size standards is gaining or extending eligibility for Federal small business assistance programs. These include SBA's 7(a) loan program, CDC/504 loan program, EIDL program, Surety Bond Guarantee Program, and Federal procurement programs intended for small businesses. Federal procurement programs provide targeted, set-aside opportunities for small businesses. These include the 8(a) Business Development (BD) program, the Historically Underutilized Business Zones (HUBZone) program, the Women-Owned Small Businesses (WOSB) program, the Economically Disadvantaged Women-Owned Small Businesses (EDWOSB) program, and the Service-Disabled Veteran-Owned Small Businesses (SDVOSB) program.

For the affected NAICS 2017 industries or their parts for which size standards have increased, based on the 2017 Economic Census data, SBA estimates that approximately 450 additional businesses would gain small business status under the proposed size standards for 2022 NAICS industries. That represents about 0.6% of the total number of small businesses in the affected industries. SBA's size standards for new industries under NAICS 2022 would result in an increase to the small business share of total receipts in those 24 industries ( i.e., those with increases in size standards) from 40.7% to 45.7%. Table 10, Impacts of Increases to Size Standards for NAICS 2022 Industries, provides impacts of increasing size standards for 22 industries and 29 parts of two industries from NAICS 2017.

As shown in Table 10, based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates that about 42 firms that are currently active in Federal contracting in those industries would gain small business status under the size standards for new industries under NAICS 2022. Based on the same data, SBA estimates that those newly-qualified small businesses under the size standards under NAICS 2022 could receive Federal small business contracts totaling about $60.4 million annually. That represents a 12.3% increase to Federal small business dollars from the baseline.

The added competition from more businesses qualifying as small can result in lower prices to certain Federal Government procurements set aside or reserved for small businesses, but SBA cannot quantify this impact precisely. Costs could also be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the new size standards, HUBZone firms might receive more set-aside contracts and fewer full and open contracts, thereby resulting in some cost savings to agencies. SBA cannot estimate such costs savings as it is impossible to determine the number and value of unrestricted contracts to be otherwise awarded to HUBZone firms will be awarded as set-aside contracts for small businesses. However, such cost savings are likely to be relatively small as only a small fraction of full and open contracts are awarded to HUBZone businesses.

Under SBA's 7(a) and CDC/504 loan programs, with more businesses qualifying as small under the new size standards under NAICS 2022, SBA will be able to guarantee more loans to small businesses. However, SBA expects the impact on loans to be minimal since applicants to SBA's financial assistance programs are typically much smaller than the industry size standard and most businesses that currently participate in the program would remain eligible for assistance even after this rule is adopted. Moreover, SBA does not anticipate that the increases to size standards will have a significant impact on the distribution of firms receiving loans by size of firm. Since SBA's size standards changes primarily impact firms at the higher margin of size standards, SBA estimates the impact to its financial assistance programs by estimating the number of loans and the amount of loans to firms greater than 10% below their size thresholds. SBA believes that expanding access to SBA's financial assistance programs will help all small businesses to adapt to changes in business environment, recover from disasters more quickly, and grow successfully, while having no impact on the ability of smaller small firms to access financial services from SBA.

Based on its internal data for fiscal years 2018-2020, SBA estimates that about one additional 7(a) and CDC/504 loans, totaling approximately $.01 million, could be made to the newly-defined small businesses under the proposed size standards under NAICS 2022. That represents a 0.003% increase to the loan amount compared to the baseline (see Table 10). The actual impact might be even smaller as the newly-qualified firms under the new size standards could have qualified anyway under the tangible net worth and net income based alternative size standard.

Newly-defined small businesses will also benefit from SBA's EIDL program, which, like SBA's 7(a) and CDC/504 loan program, typically provides loans to businesses that are much smaller than the industry size standard. Since this program is contingent on the occurrence and severity of a disaster, SBA cannot make a precise estimate of the future EIDL benefit. However, based on its internal disaster loan program data for fiscal years 2018-2020 and the amount of loans to firms greater than 10% below their size thresholds, SBA estimates that, on an annual basis, the newly-defined small businesses under the new size standards for NAICS 2022 would not be impacted.

Additionally, the newly-defined small businesses under proposed size standards under NAICS 2022 would also benefit through reduced fees, less paperwork, and fewer compliance requirements that are available to small businesses through the Federal Government programs, but SBA has no data to quantify this impact.

Costs of Increases to Size Standards

Aside from taking time to register in the System for Award Management (SAM) to be eligible to participate in Federal contracting and update the SAM profile annually, small businesses incur no direct costs to gain or retain their small business status under new size standards for NAICS 2022. All businesses willing to do business with the Federal Government must register in SAM and update their SAM profiles annually, regardless of their size status. SBA believes that a vast majority of businesses that are willing to participate in Federal contracting are already registered in SAM and update their SAM profiles annually. It is important to point out that most business entities that are already registered in SAM will not be required to update their SAM profiles. However, it will be incumbent on registrants to review, and update as necessary, their profiles to ensure that they have the correct NAICS codes. SAM requires that registered companies review and update their profiles annually, and therefore, businesses will need to pay particular attention to the changes to determine if they might affect them. They will also have to verify, and update, if necessary, their Representations and Certifications in SAM. More importantly, this final rule does not establish the new size standards for the very first time; rather it intends to modify the existing size standards to conform to new industry definitions under NAICS 2022.

To the extent that the newly-defined small firms under NAICS 2022 could become active in Federal procurement programs, this may entail some additional administrative costs to the Federal Government because of more businesses qualifying for Federal small business programs. For example, there will be more firms seeking SBA's loans, more firms eligible for enrollment in the SBA's Dynamic Small Business Search (DSBS) database or in certify.sba.gov, more firms seeking certifications as 8(a) BD or HUBZone firms, or qualifying for WOSB, EDWOSB, and SDVOSB status, and more firms applying for SBA's 8(a) BD mentor-protégé program.

Among those newly-defined small businesses seeking SBA's loans, there could be some additional costs associated with verification of their small business status. However, small business lenders have an option of using the tangible net worth and net income-based alternative size standard instead of using the industry-based size standards to establish eligibility for SBA's loans. For these reasons, SBA believes that these added administrative costs will be minor because necessary mechanisms are already in place to handle these added requirements.

Additionally, some Federal contracts may possibly have higher costs. With a greater number of businesses defined as small due to new size standards under NAICS 2022, Federal agencies may choose to set aside more contracts for competition among small businesses only instead of using a full and open competition. The movement of contracts from unrestricted competition to small business set-aside contracts might result in competition among fewer total bidders, although there will be more small businesses eligible to submit offers under the new size standards. However, any additional costs associated with fewer bidders are expected to be minor since, by law, procurements may be set aside for small businesses under the 8(a)/BD, SDB, HUBZone, WOSB, EDWOSB, or SDVOSB programs only if awards are expected to be made at fair and reasonable prices.

Costs may also be higher when full and open contracts are awarded to HUBZone businesses that receive price evaluation preferences. However, with agencies likely setting aside more contracts for small businesses in response to the availability of a larger pool of small businesses under the adopted increases to size standards, HUBZone firms might receive fewer full and open contracts, thereby resulting in some cost savings to agencies. However, such cost savings are likely to be minimal as only a small fraction of unrestricted contracts are awarded to HUBZone businesses.

Transfer Impacts of Increases to Size Standards

The new size standards for the NAICS 2022 industries may result in some redistribution of Federal contracts between the newly-qualified small businesses and large businesses and between the newly-qualified small businesses and small businesses under the current size standards. However, it would have no impact on the overall economic activity since total Federal contract dollars available for businesses to compete for will not change with changes to size standards. While SBA cannot quantify with certainty the actual outcome of the gains and losses from the redistribution of contracts among different groups of businesses, it can identify several probable impacts in qualitative terms. With the availability of a larger pool of small businesses under the increases to size standards for 22 NAICS 2017 industries and 29 parts of two industries, some unrestricted Federal contracts that would otherwise be awarded to large businesses may be set aside for small businesses. As a result, large businesses may lose some Federal contracting opportunities. Similarly, some small businesses under the current size standards may obtain fewer set-aside contracts due to the increased competition from larger businesses qualifying as small under the new size standards for NAICS 2022 industries. This impact may be offset by a greater number of procurements being set aside for small businesses because of more businesses qualifying as small under the new size standards. With larger businesses qualifying as small under the higher size standards, smaller small businesses could face some disadvantage in competing for set-aside contracts against their larger counterparts. However, SBA cannot quantify these impacts.

Decreases to Size Standards

As stated above, SBA's size standards for the 111 new industries under NAICS 2022 have resulted in a decrease to the size standards for seven industries and 53 parts of two industries from NAICS 2017. Below are descriptions of the benefits, costs, and transfer impacts of these decreases to size standards.

Benefits of Decreases to Size Standards

The most significant benefit from decreases to size standards based on analytical results is to ensure that size standards are more reflective of latest industry structure and Federal market trends and that Federal small business assistance is more effectively targeted to its intended beneficiaries. These include SBA's 7(a) loan program, CDC/504 loan program, EIDL program, Surety Bond Guarantee Program, and Federal procurement programs. As stated previously, Federal procurement programs provide targeted, set-aside opportunities for small businesses under SBA's contracting and business development programs, such as small business, 8(a) BD, HUBZone, WOSB, EDWOSB, and SDVOSB programs. The adoption of size standards based on relevant data diminishes the risk of awarding Federal Government contracts or granting financial assistance to firms that are not small anymore. Lowering size standards would also reduce the risk of allowing the largest and potentially dominant firms to qualify as small and become eligible for Federal assistance intended for small businesses. This may provide a better chance for smaller small firms to grow and benefit from the opportunities available on the Federal marketplace and strengthen the small business industrial base for the Federal Government.

Costs of Decreases to Size Standards

Table 11, Impacts of Decreases to Size Standards, shows the various impacts of proposing to lower size standards in seven industries and 53 parts of two industries under NAICS 2017. Based on the 2017 Economic Census, about 849 (1.9%) firms would lose their small business status under the decreases to size standards. However, many of these businesses were not found to have participated in Federal small businesses programs, including SBA's financial assistance and procurement programs, which suggests that impacts of above decreases to size standards would be fairly minimal. Similarly, based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates that no small businesses participating in Federal contracting would lose their small status and become ineligible to compete for set-aside contracts. Thus, SBA believes these impacts are minimal.

Transfer Impacts of Decreases to Size Standards

If the size standards are decreased, it may result in a redistribution of Federal contracts between small businesses losing their small business status and large businesses; and between small businesses losing their small business status and small businesses remaining small under the reduced size standards. However, as under the increases to size standards, this would have no impact on the overall economic activity since the total Federal contract dollars available for businesses to compete for will stay the same. While SBA cannot estimate with certainty the actual outcome of the gains and losses among different groups of businesses from contract redistribution resulting from decreases to size standards, it can identify several probable impacts. With a smaller pool of small businesses under the decreases to size standards, some set-aside Federal contracts to be otherwise awarded to small businesses may be competed on an unrestricted basis. As a result, large businesses may have more Federal contracting opportunities. However, because agencies are still required by law to award 23% of Federal dollars to small businesses, SBA expects the movement of set-aside contracts to unrestricted competition to be limited. For the same reason, small businesses under the reduced size standards are likely to obtain more set-aside contracts due to the reduced competition from fewer businesses qualifying as small under the decreases to size standards. With some larger small businesses losing small business status under the decreases to size standards, smaller small businesses would likely become more competitive in obtaining set-aside contracts. However, SBA cannot quantify these impacts.

Net Impacts of Size Standards Changes

The impacts of the increases of size standards for 22 industries and 29 parts of two industries were shown in Table 10 (above). Similarly, the impacts of decreases of size standards for seven industries and 53 parts of two industries were presented in Table 11 (above). Table 12, Net Impacts of Size Standards Changes, below, presents the net impacts of changes to size standards for 29 industries and 82 parts of four industries.

Based on the 2017 Economic Census, SBA estimates that when moving from NAICS 2017 to NAICS 2022, 29 industries and 82 parts of four industries resulted in size standard changes. About 403 firms (almost all in NAICS 2017 industry 454110) would not qualify as small under the new size standards for NAICS 2022 industries. That represents about 0.3% of all firms classified as small in those industries and industry parts under the current size standards.

Based on the FPDS-NG data for fiscal years 2018-2020, SBA estimates that about 42 unique active firms in Federal contracting in those industries would gain their small business status under the changes to size standards, most of them in Sector 31-33 (Manufacturing). This represents an increase of about 2.8% of the total number of small businesses participating in Federal contracting under the current size standards. Based on the same data, SBA estimates that about $60.4 million of Federal procurement dollars would become available to all small firms, including those gaining small status. This represents an increase of 12.2% from the baseline. SBA estimates that the dollars obligated to small businesses will increase despite a reduction in the total number of small firms because the contract dollars to newly-qualified small businesses in sectors with increases to size standards is higher than the contract dollars to small businesses losing small business status in sectors with decreases to size standards.

Based on the SBA's loan data for fiscal years 2018-2020, the total number of 7(a) and CDC/504 loans will not be impacted, and the loan amount may increase slightly since the average loan value to firms with increases to size standards is higher than the average loan value to firms with decreases to size standards.

Firms' participation under the SBA's EIDL program will be affected as well. Since the benefit provided through this program is contingent on the occurrence and severity of a disaster in the future, SBA cannot make a meaningful estimate of this impact. However, based on the disaster loan program data for fiscal years 2018-2020, SBA estimates that the total number of EIDL loans and the loan amount will not be impacted.

3. What alternatives have been considered?

As stated previously, as an alternative to adopting new size standards for NAICS 2022 industries, SBA considered retaining NAICS 2017 as the basis of industry definitions for its small business size standards. That would, however, lead to inconsistencies between SBA's size standards and establishment data published by Federal agencies that will adopt NAICS 2022 for their statistical and other data collection programs. OMB stated in its December 21, 2021, notice that “Federal statistical establishment data published for reference years beginning on or after January 1, 2022, should be published using the 2022 NAICS United States codes.” SBA is not a statistical agency, but it uses for its size standards analyses establishment data collected by other Federal agencies, such as the Economic Census data and County Business Patterns from the U.S. Census Bureau. If SBA continues using NAICS 2017 for its size standards, it will not be able to analyze and evaluate industry structure adequately and accurately and adjust small business size standards appropriately because the forthcoming Economic Census and County Business Patterns data based on NAICS 2022 will not be compatible with NAICS 2017 industry definitions. That would run counter to the Jobs Act mandate that requires SBA to review all size standards and adjust them appropriately to reflect the current industry structure and market conditions every five years.

To establish, review, or revise, where necessary, small business size standards, SBA uses special tabulations of industry data that it obtains from the U.S. Census Bureau based on its Economic Census of U.S. industries and businesses, and establishment data from its County Business Patterns (CBP). Because the 2022 Economic Census and CBP data will be based on NAICS 2022 industry definitions, it is imperative that SBA also use NAICS 2022 as the basis of industry definitions for its table of small business size standards.

Congressional Review Act

Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (codified at 5 U.S.C. 801-808), also known as the Congressional Review Act or CRA, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. SBA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States. A major rule under the CRA cannot take effect until 60 days after it is published in the Federal Register . OMB's Office of Information and Regulatory Affairs has determined that this rule is not a “major rule” as defined by 5 U.S.C. 804(2).

Final Regulatory Flexibility Analysis

Under the Regulatory Flexibility Act (RFA), this final rule may have a significant impact on a substantial number of small businesses in some industries whose size standards have been changed as a result of adopting NAICS 2022 for size standards. As described above, this rule may affect small businesses applying for Federal Government contracts, loans under SBA's 7(a), 504, and EIDL Programs, and assistance under other Federal small business programs.

Immediately below, SBA sets forth a final regulatory flexibility analysis (FRFA) of this final rule addressing the following questions: (1) What are the need for and objectives of the rule?; (2) What are SBA's description and estimate of the number of small businesses to which the rule will apply?; (3) What are the projected reporting, record keeping, and other compliance requirements of the rule?;

(4) What are the relevant Federal rules that may duplicate, overlap, or conflict with the rule?; and (5) What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small businesses?

1. What are the need for and objective of the rule?

The Small Business Act requires that small business size standards vary from industry to industry reflecting the differing characteristics of the various industries. SBA uses the latest NAICS as a basis of industries definitions for its table of size standards. As part of its five-year review of and revisions to NAICS industry definitions, OMB published its latest NAICS revision, NAICS 2022, on December 21, 2021. According to the OMB's notice, Federal establishment and industry data for reference years beginning on or after January 1, 2022, should be published using NAICS 2022. This rule amends SBA's small business size regulations to incorporate NAICS 2022 into its table of size standards. This not only makes SBA's size standards more reflective of the latest industry differences but also makes them more consistent with latest industry data the Agency uses to establish, review or adjust size standards. Updating size standards to the latest industry definitions also serves the SBA's mandate to review all size standards and make appropriate adjustments to reflect market conditions under the Jobs Act.

2. What are SBA's description and estimate of the number of small businesses to which the rule will apply?

With the update of size standards to the latest industry definitions under NAICS 2022, Federal small business assistance is more effectively targeted to its intended beneficiaries. The NAICS 2022 revision created 111 new industries by reclassifying, combining, or splitting 156 NAICS 2017 industries or their parts. SBA's size standards for these 111 new industries under NAICS 2022 will result in an increase to the size standards for 22 industries and 29 parts of two industries under NAICS 2017, a decrease to size standards for seven industries and 53 parts of two industries, a change in the size standard measure from average annual receipts to number of employees for one industry, a change in the size standard measure from number of employees to average annual receipts for a part of one industry, and no change in size standards for 117 industries and 19 parts of seven industries. In 22 industries and 29 parts of two industries whose size standards would increase due to the adoption of NAICS 2022, nearly 450 firms above the current size standards would qualify as small under the updated size standards, thereby making them eligible for Federal small business assistance programs. Based on the data for fiscal years 2018-2020, SBA estimates that approximately $60.0 million in Federal contracts and about $100,000 in SBA 7(a) and 504 loans could be awarded to the newly defined small businesses under the updated size standards. The updated size standards would enable advanced small businesses to maintain their small business size status for a longer period and some mid-size businesses ( i.e., businesses that have just exceeded the size thresholds) regain their small business status. In the seven NAICS 2017 industries and 53 parts of two industries for which size standards will decrease as a result of adoption of NAICS 2022, 849 firms below the current size standards would lose their small business size status under the proposed size standards. However, the program data suggests that this would cause no impact on them in terms of access to Federal contracting and SBA's loans programs. Currently, they are not participating in any small business programs.

3. What are the projected reporting, record keeping and other compliance requirements of the rule?

The size standard changes due to the adoption of NAICS 2022 impose no additional reporting or record keeping requirements on small businesses. However, qualifying for Federal small business contracting and other programs may require businesses to register in SAM and recertify in SAM that they are small at least once annually. Therefore, the newly qualified small businesses opting to participate in those programs must comply with SAM requirements. There are minimal costs associated with SAM registration and annual recertification, but this final rule does not impose any new costs in this area. Changing size standards alters the access to SBA's financial and other Federal programs that assist small businesses but does not impose a regulatory burden because they neither regulate nor control business behavior.

4. What are the relevant Federal rules, which may duplicate, overlap, or conflict with the rule?

Under section 3(a)(2)(C) of the Small Business Act, 15 U.S.C. 632(a)(2)(c), Federal agencies must generally use SBA's size standards to define a small business, unless specifically authorized by statute to do otherwise. In 1995, SBA published in the Federal Register a list of statutory and regulatory size standards that identified the application of SBA's size standards as well as other size standards used by Federal agencies (60 FR 57988 (November 24, 1995)). An agency may establish for its programs a size standard that is different from those established by SBA if approved by SBA's Administrator in accordance with 13 CFR 121.903. SBA is not aware of any Federal rule that would duplicate or conflict with establishing or updating size standards.

However, the Small Business Act and SBA's regulations allow Federal agencies to develop different size standards if they believe that SBA's size standards are not appropriate for their programs, with the approval of SBA's Administrator (13 CFR 121.903). The RFA authorizes a Federal agency to establish an alternative small business definition, after consultation with the Office of Advocacy of the U.S. Small Business Administration (5 U.S.C. 601(3)).

5. What alternatives will allow the Agency to accomplish its regulatory objectives while minimizing the impact on small entities?

By law, SBA is required to develop numerical size standards for establishing eligibility for Federal small business assistance programs. Other than varying levels of size standards by industry and changing the size measures, no practical alternative exists to the systems of numerical size standards. As stated previously, SBA considered continuing to use NAICS 2017 as a basis of industry definitions for its table of size standards. However, that would render SBA's table of size standards incompatible with Federal industry and establishment statistics and other databases when evaluating industry characteristics to ensure size standards are reflective of current industry structure and market conditions.

Executive Order 13563

A description of the need for this proposed regulatory action and benefits and costs associated with this action including possible distribution impacts that relate to Executive Order 13563 are included above in the Cost Benefit Analysis.

To engage interested parties in this action, SBA reached out to all Federal agencies advising them that the Agency plans to update its table of size standards to NAICS 2022, effective October 1, 2022, and that agencies must continue using the current size standards until that date. Adopting the updated size standards on October 1, 2022, is consistent with SBA's adoptions of previous NAICS revisions at the beginning of the new fiscal year following the OMB's January 1 effective date of NAICS revisions for Federal statistical agencies.

Unlike the most previous NAICS revisions which SBA adopted for its size standards either through a direct final rule or through an interim final rule, for the adoption of NAICS 2022 revision, SBA issued this proposed rule and sought comments to better engage the public in the process. SBA received two comments during the comment period which SBA has summarized and discussed above in the Discussion of Comments section. SBA also updated the size standards web page at www.sba.gov/size, asking interested parties to comment on the rule. SBA thoroughly considered all public comments when developing this final rule.

Executive Order 12988

This action meets applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

Executive Order 13132

For purposes of Executive Order 13132, SBA has determined that this final rule will not have substantial, direct effects on the States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, SBA has determined that this final rule has no federalism implications warranting preparation of a federalism assessment.

Paperwork Reduction Act

For the purpose of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this final rule would not impose any new reporting or record keeping requirements.

List of Subjects in 13 CFR Part 121

• Administrative practice and procedure
• Federal Government procurement
• Federal Government property
• Grant programs—Business
• Individuals with disabilities
• Loan programs—Business
• Reporting and recordkeeping requirements
• Small businesses

For the reasons set forth in the preamble, SBA amends 13 CFR part 121 as follows:

PART 121—SMALL BUSINESS SIZE REGULATIONS

1. The authority citation for part 121 is revised to read as follows:

Authority: 15 U.S.C. 632, 634(b)(6), 636(a)(36), 662, 694a(9), and 9012.

2. In § 121.201, amend the table, “Small Business Size Standards by NAICS Industry” as follows:

a. Remove the entries for 212111, 212112, and 212113;

b. Add entries for 212114, 212115, and 212220 in numerical order;

c. Remove the entries for 212221 and 212222;

d. Add an entry for 212290 in numerical order;

e. Remove the entries for 212291 and 212299;

f. Add an entry for 212323 in numerical order;

g. Remove the entries for 212324 and 212325;

h. Add an entry for 212390 in numerical order;

i. Remove the entries for 212391, 212392, 212393, and 212399;

j. Revise entry 311221;

k. Remove the entry for 315110;

l. Add an entry for 315120 in numerical order;

m. Remove the entries for 315190, 315220, and 315240;

n. Add an entry for 315250 in numerical order;

o. Remove the entry for 315280;

p. Add an entry for 316990 in numerical order;

q. Remove the entries for 316992, 316998, 321213, and 321214;

r. Add entries for 321215 and 322120 in numerical order;

s. Remove the entries for 322121 and 322122;

t. Add an entry for 325315 in numerical order;

u. Revise entry 325992;

v. Remove the entry for 333244;

w. Add an entry for 333248 in numerical order;

x. Remove the entry for 333249;

y. Add an entry for 333310 in numerical order;

z. Remove the entries for 333314, 333316, 333318, and 333997;

aa. Add an entry for 333998 in numerical order;

bb. Remove the entry for 333999;

cc. Add an entry for 334610 in numerical order;

dd. Remove the entries for 334613, 334614, 335110, 335121, 335122, and 335129.

ee. Add entries for 335131, 335132, 335139, and 335910 in numerical order;

ff. Remove the entries for 335911 and 335912;

gg. Add an entry for 336110 in numerical order;

hh. Remove the entries for 336111, 336112, 337124, and 337125;

ii. Add an entry for 337126 in numerical order;

jj. Remove the entries for 424320 and 424330;

kk. Add an entry for 424350 in numerical order;

ll. Revise entry 424940 and the heading for Subsector 425;

mm. Remove the entry for 425110;

nn. Add an entry for 441227 in numerical order;

oo. Remove the entries for 441228, 441310, and 441320;

pp. Add entries for 441330 and 441340 in numerical order;

qq. Remove Subsectors 442 and 443;

rr. Revise entry 444120;

ss. Remove the entry for 444130;

tt. Add entries for 444140 and 444180 in numerical order;

uu. Remove the entries for 444190, 444210, and 444220;

vv. Add entries for 444230 and 444240 in numerical order;

ww. Revise Subsector 445;

xx. Remove Subsectors 446, 447, and 448;

yy. Add Subsector 449 in numerical order;

zz. Remove Subsectors 451, 452, 453, and 454;

aaa. Add Subsectors 455, 456, 457, 458, and 459 in numerical order;

bbb. Revise entry 485310;

ccc. Remove Subsector 511;

ddd. Add Subsector 513 in numerical order;

eee. Remove Subsector 515;

fff. Add Subsector 516 in numerical order;

ggg. Revise Subsectors 517, 518, and 519;

hhh. Remove the entry for 522120;

iii. Add an entry for 522180 in numerical order;

jjj. Remove the entries for 522190, 522293, 522294, and 522298;

kkk. Add an entry for 522299 in numerical order;

lll. Remove the entries for 523110, 523120, 523130, and 523140;

mmm. Add entries for 523150 and 523160 in numerical order;

nnn. Remove the entries for 523920 and 523930;

ooo. Add an entry for 523940 in numerical order;

ppp. Revise entries for 524292, 541380, 541850, 561611, and 624410;

qqq. Remove the entries for 811112 and 811113;

rrr. Add an entry for 811114 in numerical order;

sss. Remove the entry for 811118;

ttt. Add an entry for 811210 in numerical order;

uuu. Remove the entries for 811211, 811212, 811213, and 811219; and

vvv. Revise footnotes 8 and 15 at the end of the table.

The additions and revisions read as follows: